Tuesday 18 September 2012

Mortgage Analysis - Will we see a remortgage bounce?

A rise in remortgage lending and an optimistic forecast for the rest of the year offered a rare piece of good news last week but experts are still cautious about future growth. The LMS Remortgage Report estimates remortgage lending for July rose 13 per cent compared with June, from £3.1bn to £3.5bn. Signs of market improvements are to be welcomed.

Remortgages now represent only 25 per cent of all gross mortgage lending, down from 32 per cent in July last year.

LMS chief executive Andy Knee says: "The good news is that better deals have materialised. Lenders have recently launched a number of sub-3 per cent rates with terms of four or five years."

Coreco director Andrew Montlake says the backdrop of rising SVRs from a number of the major high-street lenders could give the remortgage market the push it needs to return to a position of strength.

"Every time another lender puts up an SVR, as Santander did recently, you get a rush of phone calls as people think about getting something in place for when their rate expires."

Santander became the latest lender to announce an SVR hike as it wrote to customers informing them that it intends to increase its standard variable rate from 4.24 per cent to 4.74 per cent from October 3 with its SVR cap margin – the maximum amount above the Bank of England base rate that it can charge – rising from 3.75 per cent to 4.99 per cent from September 24.

"For those who are on interest only, the self-serve clients, what are they going to do? They are just stuck and until that logjam is unstuck, the market is never going to return to what it should be."

The Council for Mortgage Lenders agrees. A spokeswoman says: "We have seen movement from some lenders on SVRs and new business pricing and that will be a motivator for those borrowers who are not sitting on such great deals or who are more risk adverse.

"People on very low interest-only rates may still adopt a wait and see attitude which may have even increased in the wake of eurozone wobbles as they believe policy rates will stay lower for longer."

What does this all mean for you the man on the street?

Basically that irrespective of your circumstance you should review your mortgage with your mortgage broker to calculate the best route forward, even if you are on a low variable rate.  A good adviser will tell you when to move and plot a regular review period for you to ensure that if the market do move you can capitalise on it as quickly as possible.

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